This conversation is a perfect example of why tax reform is a fantasy. Too many people know far too little and are driven by the emotional rhetoric of what they believe is happening vs. the reality.
emotional rhetoric is exactly what harris is going after with this...and the rest of their platform.
if some of it benefits society, so be it.
Interesting. I just had the thought while sipping coffee out in the garage, hmmm, what if I run my cards up and just pay the monthly minimum, indefinitely.
I am at the age when the paradigm shifts again. I have no estate to pass on, so WTF not ?
Nah, Harris has a plan to tax credit card debt too.
No wait, that's trump because the GOP thinks the poor get all the $.
Interesting. I just had the thought while sipping coffee out in the garage, hmmm, what if I run my cards up and just pay the monthly minimum, indefinitely.
I am at the age when the paradigm shifts again. I have no estate to pass on, so WTF not ?
Reminds me of that law and order guy who liked to stiff people...
Interesting. I just had the thought while sipping coffee out in the garage, hmmm, what if I run my cards up and just pay the monthly minimum, indefinitely.
I am at the age when the paradigm shifts again. I have no estate to pass on, so WTF not ?
So long as you don't have a spouse with a shared account who would need to pay the minimum with whatever income remains after your demise... go get 'em.
Keep in mind that at current interest rates...you'd better die within the next 4 years or it will cost you more than paying cash, even if they wipe off the debt.
Interesting. I just had the thought while sipping coffee out in the garage, hmmm, what if I run my cards up and just pay the monthly minimum, indefinitely.
I am at the age when the paradigm shifts again. I have no estate to pass on, so WTF not ?
My mom did that, unintentionally. Dying of lung cancer, she never did anything ostentatious (that I know of) but left the companies with a lot of unpaid bills. I suppose they could've tried somehow to get satisfaction from selling her smoky brown mobile home and piles of old newspapers that were gonna be worth something someday. But they never tried.
This is so well understood by most that it has a name - "buy, borrow,die", and you can find all kinds of references to it.
Interesting. I just had the thought while sipping coffee out in the garage, hmmm, what if I run my cards up and just pay the monthly minimum, indefinitely.
I am at the age when the paradigm shifts again. I have no estate to pass on, so WTF not ?
Stock is acquired for a dollar.
Value increases to $10.
Owner borrows $5 against the stock and uses that to buy a coffee.
Owner pays the bank $0.01 in interest instead of the $1 that would be owed in taxes (to the .gov not the bank).
Owner of stock dies.
Heir of owner gets a stepped up basis to $12 (current market value _/+ magic formula).
Stock drops to $9
Heir sells and has a tax loss of $1 to offset other income, and pays even less tax.
The heir may also sell at a profit, but the stepped up basis means the gain from $1-$12 is not taxed, only the gain from $12 to whatever market value is when they sell.
This is so well understood by most that it has a name - "buy, borrow,die", and you can find all kinds of references to it.
Agree with all of it, but the 40% federal estate tax is going to take a bite out of any of the $100M+ folks we're talking about. Many buy life insurance to cover the taxes..but at some point that becomes very expensive.
The SCOTUS just ruled on a case about the use of insurance proceeds... stating that the proceeds are included in the value of the estate for tax purposes... so as usual, all planning is subject to how quickly you're willing to exit versus the timing of future law changes.
But the estate tax is based on the stepped-up value...so it's not "free" money (especially in my state...where non-linear dependents pay 16%).
This conversation is a perfect example of why tax reform is a fantasy. Too many people know far too little and are driven by the emotional rhetoric of what they believe is happening vs. the reality. When in doubt, bring up the inefficiencies in government (which is also what reform would address... but anyway...).
This is exactly how they avoid taxation.
Stock is acquired for a dollar.
Value increases to $10.
Owner borrows $5 against the stock and uses that to buy a coffee.
Owner pays the bank $0.01 in interest instead of the $1 that would be owed in taxes (to the .gov not the bank).
Owner of stock dies.
Heir of owner gets a stepped up basis to $12 (current market value _/+ magic formula).
Stock drops to $9
Heir sells and has a tax loss of $1 to offset other income, and pays even less tax.
The heir may also sell at a profit, but the stepped up basis means the gain from $1-$12 is not taxed, only the gain from $12 to whatever market value is when they sell.
This is so well understood by most that it has a name - "buy, borrow,die", and you can find all kinds of references to it.
And as note, if the owner dies, the basis is stepped up so no tax is ever applied to the gain.
But the estate tax is based on the stepped-up value...so it's not "free" money (especially in my state...where non-linear dependents pay 16%).
This conversation is a perfect example of why tax reform is a fantasy. Too many people know far too little and are driven by the emotional rhetoric of what they believe is happening vs. the reality. When in doubt, bring up the inefficiencies in government (which is also what reform would address... but anyway...).
At best this might be an accelerated tax.
What happens when the loan is repaid, now a realized loss?
Seems like it opens up a whole new wealth management strategy...I had big losses this year, but expect windfalls next year. Let me take a loan out this year and then repay it next...
Way too many problems with this idea...which to me is nothing more than a headline, "look what the rich do, we are going to catch these greedy f@#4ers!"
And the bigger problem is the democrats seem only interested in the revenue side, no effort to control costs but instead continue to spend...and this is partly why trump is still "perceived" as an alternative.
It's not accelerated, it is applied at the time that a value is realized (you got money in exchange for the collateral on the warrant - a value was assigned). The idea is to make this strategy unappealing, it would be more likely to just sell the shares to gain access to the liquid capital. Sure there are other wealth management strategies, but this eliminates avoiding taxation on money that has been received and used. And as note, if the owner dies, the basis is stepped up so no tax is ever applied to the gain.
That is exactly what we are proposing. Closing a tax loophole by changing how we classify the money they receive. If is a loan against an asset, the value of that asset has been realized and tax should therefor be due. They are using the loan to get $s while avoiding realizing the gain, so just make it the same thing (it really is, they are collateralizing the warrant and getting a pile of dollars - that is establishing a value and receiving the gain at that point.).
At best this might be an accelerated tax.
What happens when the loan is repaid, now a realized loss?
Seems like it opens up a whole new wealth management strategy...I had big losses this year, but expect windfalls next year. Let me take a loan out this year and then repay it next...
Way too many problems with this idea...which to me is nothing more than a headline, "look what the rich do, we are going to catch these greedy f@#4ers!"
And the bigger problem is the democrats seem only interested in the revenue side, no effort to control costs but instead continue to spend...and this is partly why trump is still "perceived" as an alternative.
that story is a bit conflated - mixing the tax loopholes for the rich that allows them to have a low effective tax rate with those same rich borrowing at low interest rates.
What are the funds used for?
Spent on discretionary purchases?
Invested in real assets/businesses?
Invested in other financial assets?
In the latter two cases, the hope is the returns on those investments are greater than the cost of the loan, which will need to be repaid or refinanced.
Again, wouldnt it be easier to fix the tax loopholes than to create further complexity by trying to tax unrealized gains, which probably will lead to a whole new set of loopholes?
That is exactly what we are proposing. Closing a tax loophole by changing how we classify the money they receive. If is a loan against an asset, the value of that asset has been realized and tax should therefor be due. They are using the loan to get $s while avoiding realizing the gain, so just make it the same thing (it really is, they are collateralizing the warrant and getting a pile of dollars - that is establishing a value and receiving the gain at that point.).
that story is a bit conflated - mixing the tax loopholes for the rich that allows them to have a low effective tax rate with those same rich borrowing at low interest rates.
What are the funds used for?
Spent on discretionary purchases?
Invested in real assets/businesses?
Invested in other financial assets?
In the latter two cases, the hope is the returns on those investments are greater than the cost of the loan, which will need to be repaid or refinanced.
Again, wouldnt it be easier to fix the tax loopholes than to create further complexity by trying to tax unrealized gains, which probably will lead to a whole new set of loopholes?
You are struggling to appreciate the scale of the opportunity, and your commentary about ROI vs. carrying costs reinforces your applying normal logic to illogical wealth management.
The US tax codes are pure insanity (at all levels...especially sales tax...but that's another story for another day...). The layers of dependencies and calculations can only really be corrected with a complete overhaul of the way we assess tax, and nobody has the strength to do that. It would have to address issues like mortgage interest and capital gains... which are seen as foundational elements of the American Dream. The complexity of the codes also enables the type bullshit around the benefits of tax cuts and the ability for the rank-and-file American to believe they are better off with a cut, even though they often are not.
Last comment... while it would be good to generate some more cash and make things a bit more fair... taxing the ultra-wealthy won't solve too many problems. The Forbes 400 richest Americans are worth between $3 and $3.5 Trillion. The national debt is 10 times that. Bigger solutions are necessary.
Billionaires don't think like millionaires... the rules are different.
that story is a bit conflated - mixing the tax loopholes for the rich that allows them to have a low effective tax rate with those same rich borrowing at low interest rates.
What are the funds used for?
Spent on discretionary purchases?
Invested in real assets/businesses?
Invested in other financial assets?
In the latter two cases, the hope is the returns on those investments are greater than the cost of the loan, which will need to be repaid or refinanced.
Again, wouldnt it be easier to fix the tax loopholes than to create further complexity by trying to tax unrealized gains, which probably will lead to a whole new set of loopholes?
only if they pay themselves a dividend/make a distribution
You are missing the point. they don't pay a dividend or take a distribution. The board issues them warrants for X shares. They show those warrants to the bank and get a loan. They have paid no tax. They get a pile of cash at a stupid low interest rate and still have control of the stock. They then use timing and other strategies to minimize taxes when / if they do sell the stock, or they just borrow more to pay the interest (against more shares issued or increased value of X shares), then when they die, the basis gets stepped up, so no taxes are ever paid on huge gains. The banks get some interest, but the public misses the tax revenue. That tax revenue loss is made up by taxing you and me and every other person not using this 'strategy' so the .gov has funds to operate.
